Relationship Bonds and Loyalty on Online Customers.

Relationship Bonds and Loyalty on Online Customers Supervisor: Dr. Teresa Maria Rocha Fernandes Silva Relationship Bonds and Loyalty on Online Customers by Andreia Gomes Master Dissertation in Marketing Teresa Maria Rocha Fernandes Silva September, 2014 Relationship Bonds and Loyalty on Online Customers ii Short Biography Graduate on Management in 2009 at School of Economics and Management of University of Minho. Worked as administrative in the insurances sector from 2009 to 2010 and then, from 2010 to 2012 as marketing assistant of an electronic equipment manufacturer and of a paper distributor. In 2012, started to work as web content manager in an online retailer. iii Acknowledgment First of all I would like to thanks to my husband for all his support, patience and understanding during the past two years of this Master. Without him, this dissertation would not be a reality. Secondly, I would like to thanks to my parents for the incentives and support. Every time that I wanted to quit, they were there to remember me that it was only a last effort. Finally, I would like to thanks to Dr. Teresa Maria Rocha Fernandes Silva for her guidance and supervision, which was crucial for the development of this dissertation, and for the fact that she was always available to answer my questions and overcome my doubts. iv Abstract Over the last years, motivated by the greater acceptance of online shopping by individual customers, online companies have shown interest in understanding how to maintain long-lasting relationships with their customers, as they realised that long-term customers are cheaper to maintain, they are more likely to buy additional services/products from the company, to express positive opinions (word of mouth) and to make recommendations to others, and to resist to persuasion attempts from competition. However, to loyal an online customer is more demanding than to loyal an offline one because they have a large desire to search, compare and try new things, and the internet is the best, cheapest and fastest way to do it. This hampers relationship building and, therefore, the existence of any bonds. In this context, this dissertation aimed to identify the relational bonds that emerge from customer-firm interaction, on electronic commerce, and to understand which ones have a higher influence on customer loyalty. To pursue that goal an exploratory research with Portuguese online customers was carried out, through the administration of a web survey questionnaire. The results from the data analysis showed that emotional bonds, financial bonds and structural bonds, in this exact order, had the highest relative contributions to explain loyalty, but only financial bonds and emotional bonds were found to significantly affect loyalty. This study made contributions to the management and the literature. As management is concerned, this study demonstrated that to achieve customer loyalty, online companies should invest in developing positive emotions and give online customers economic benefits. As literature is concerned, a new approach on relational bonding on online environment was made; it was shown that online relational bonds differ from offline relational bonds; and that online customers seem to be less loyal. Keywords: Relationship Marketing; Relational Bonds; Customer Loyalty; Ecommerce. v Sumário Nos últimos anos, motivado pela grande aceitação das compras eletrónicas (online) pelos consumidores, as empresas de comércio eletrónico têm mostrado interesse em perceber como manter relações duradoiras com os seus consumidores, pois perceberam que clientes de longa data são mais baratos de manter, são mais prováveis de comprar serviços/produtos adicionais da empresa, de expressar opiniões positivas (passa-a-palavra), de fazer recomendações e de resistir a tentativas de persuasão da concorrência. Contudo, fidelizar um cliente online é mais complicado do que fidelizar um cliente tradicional, porque os primeiros têm um grande desejo de pesquisar, comparar e experimentar coisas novas, e a internet é a melhor, mais barata e mais rápida forma de o fazer. Isto dificulta o desenvolvimento de relações e a existência de laços. Neste contexto, esta dissertação tem como objetivo identificar os laços relacionais que emergem da interação consumidor-empresa, no comércio online, e perceber quais têm maior influência na lealdade do consumidor. Para perseguir este objetivo foi elaborada uma pesquisa exploratória com consumidores portugueses que compram online, através da administração de um inquérito por questionário na internet. Os resultados obtidos da análise de dados mostraram que os laços emocionais, financeiros e estruturais, por esta ordem, têm a maior contribuição relativa para explicar a lealdade, mas apenas os laços financeiros e emocionais afetam significativamente a lealdade. Este estudo apresentou contribuições para a gestão e literatura. Ao nível da gestão, este estudo demonstrou que para alcançar a lealdade, as empresas online devem investir em desenvolver emoções positivas e oferecer benefícios económicos aos seus clientes. Relativamente à literatura, apresentou-se uma nova abordagem relativamente aos laços relacionais no contexto do comércio online; demonstrou-se que os laços relacionais online são diferentes dos offline (empresais com operação tradicional); e que os consumidores online parecem ser menos leais. Palavras-chave: Marketing Relacional; Laços Relacionais; Lealdade; Comércio Eletrónico. vi Table of Contents Short Biography ................................................................................................................ ii Acknowledgment ............................................................................................................. iii Abstract ............................................................................................................................ iv Sumário ............................................................................................................................. v Table of Contents ............................................................................................................. vi Table of Tables and Figures........................................................................................... viii Table of Tables ........................................................................................................... viii Table of Figures ......................................................................................................... viii Chapter 1 - Introduction .................................................................................................... 1 1.1 Background ............................................................................................................ 2 1.2 Objectives and importance of study ........................................................................ 3 1.3 Report Structure ...................................................................................................... 4 Chapter 2 – Literature Review .......................................................................................... 6 2.1 Relationship Marketing ........................................................................................... 7 2.2 Relational Bonds ................................................................................................... 10 2.3 Customer Loyalty .................................................................................................. 11 2.3.1 Antecedents of Attitudinal and Behavioural Loyalty .................................... 14 2.3.2 Online Loyalty vs. Offline Loyalty................................................................ 16 Chapter 3 - Research Framework and Methodology ...................................................... 19 3.1 Research Framework ............................................................................................. 20 3.1.1 Research Objectives ....................................................................................... 20 3.1.2 Research Hypothesis ...................................................................................... 21 3.2 Methodology ......................................................................................................... 22 3.2.1 Research Methodology .................................................................................. 22 3.2.2 Data Collection .............................................................................................. 24 vii Chapter 4 - Data Analysis ............................................................................................... 25 4.1 Description of the Sample ..................................................................................... 26 4.2 Data Analysis ........................................................................................................ 27 4.2.1 Exploratory Factor Analysis .......................................................................... 27 4.2.2 Descriptive Statistics...................................................................................... 29 4.2.3 Multiple Linear Regression ........................................................................... 31 Chapter 5 – Final Conclusions ........................................................................................ 33 5.1 Discussion of Results ............................................................................................ 34 5.2 Contributions for Theory and Management .......................................................... 37 5.3 Limitations and Future Research .......................................................................... 37 References ....................................................................................................................... 39 Attachments .................................................................................................................... 44 Attachment 1 – Questionnaire ..................................................................................... 45 Attachment 2 – Questionnaire Measurement Items .................................................... 48 viii Table of Tables and Figures Table of Tables Table 1 – Qualitative research versus Quantitative Research ......................................... 23 Table 2 – Rotated Factor Matrix .................................................................................... 28 Table 3 – Descriptive Statistics for Relational Bonds and Loyalty ................................ 30 Table 4 - Regression Analysis between Relational Bonds variables and Loyalty.......... 32 Table 5 – Research Hypothesis Validation ..................................................................... 32 Table of Figures Figure 1 – Relative Attitude-Behaviour Relationship .................................................... 12 Figure 2 – Customer Loyalty Framework....................................................................... 15 Figure 3 – Hypothesized Model...................................................................................... 22 Figure 4 – Descriptive Statistics for Sample Characteristics .......................................... 26 1 Chapter 1 - Introduction 8 Moreover, Berry and Grönroos, both see RM as “maintaining and enhancing relationships with customers”, because marketing can no longer be only about attracting new customers, selling and delivering products, as transactional marketing is (Narteh, Agbemabiese et al., 2013). Now marketing (RM) has to understand and anticipate customers’ needs, investing in a two-way communication approach (Leahy, 2011), in order to build long-lasting relationships with customers that ultimately will lead to customer loyalty. Companies now face higher challenges, being customers’ increasing power one of them. Customers’ increasing power is mainly a consequence of the technological world. Today’s customers are more sophisticated, better informed and more demanding. They do not just want goods or services, “they demand a much more holistic offering” (Grönroos 2004, p. 101), that contains information about the product usage, safety, installation and repairing, tailor-design, just-in-time logistics, complains management, etc. (Grönroos, 2004). Very often the inexistence of that holistic offer is a dissatisfaction motive. Since a company cannot retain a dissatisfied customer, it cannot loyal him/her either. Therefore, in a relationship perspective, companies’ offer should include a core solution/product and a range of additional services (Grönroos, 2004). Although relationship marketing leads to customer satisfaction and loyalty (Leahy, 2011), it will not automatically lead to strong customer relationship, because customers have different relationship levels (Liljander and Strandvik, 1995). Following this view, Dwyer, Schurr et al., (1987) elaborated a five phase relationship lifecycle framework to explain how customer-seller relationship evolve. Those five phases are: awareness, exploration, expansion, commitment and dissolution. In the relationship awareness phase, buyers recognize sellers as feasible based on supplier’s reputation, however, no type of interaction occurs at this stage (Terawatanavong, Whitwell et al., 2007). In the next phase, relationship exploration, social interaction is developed as communication and trial purchases are initiated. At exploration, buyers test sellers’ performances, as well as they try to exercise power through negotiation. Trust is started to build up. 9 The next step in the buyer-seller relationship, labelled as relationship expansion, is to think on the long-term. According to Dwyer, Schurr et al. (1987), during relationship expansion, buyer-seller relationship is deepened by increasing relationship interdependency (Terawatanavong, Whitwell et al., 2007). As the buyer is concerned, alternative providers list will be narrowed and switching costs will increase, as a higher relationship independency and trust are created. As a consequence, buyers’ satisfaction regarding the relationship is enhanced. As the supplier is concerned, more buyers trust means lower perceived risk and more confidence, which, as a result, will lead to more repurchase intention, less negative word of mouth and relationship continuity (Terawatanavong, Whitwell et al., 2007). In Dwyer’s relationship lifecycle framework, relationship commitment is the phase that every seller is willing to achieve, because is at this level that customer loyalty is achieved (Dwyer, Schurr et al., 1987). At this stage, buyer and seller benefit from relationship continuity and long-term orientation. The seller has retained a customer that is willing to resist attractive shorter-term benefits offered by others and to develop social norms and the buyer has a seller that knows the buyer’s needs and it is able to anticipate and respond according to them (Terawatanavong, Whitwell et al., 2007). When a buyer is committed to a seller, it means that the buyer has enough accumulated experience to truly trust the seller and to develop an affective commitment. The last one is relationship dissolution. As Dwyer, Schurr et al., (1987) stated, not every buyer-seller relationship enters the exploration phase, and even the ones that do pass exploration, may not enter expansion or turn into commitment, due to internal and external circumstances that may force buyers to gradually leave the relationship (Terawatanavong, Whitwell et al., 2007). Summing what was stated above; relationship marketing creates a dialogue between customers and providers in order to develop long-term loyalty. Dwyer’s relationship lifecycle framework shows that “commitment is the climax of relational bonding” (Terawatanavong, Whitwell et al., 2007, p. 923), and Grönroos (2004) showed that strengthening bonds is a way of achieving customer loyalty. In sum, to achieve long-term customer loyalty, relationship marketing has to create and strengthen relational bonds between customers and providers. 10 In the next section, relational bonds and customer loyalty will be discussed in detail. 2.2 Relational Bonds Bonds are the exit barriers that tie the customer to the firm and maintain the relationship (Liljander and Strandvik,1995; Smith,1998; Wendelin, 2011). Bonds can cause a positive and negative impact in the relationship, affecting relationship strength (Wendelin, 2011). The most commons bonds on the literature are: financial, social, structural and emotional bonds (Berry, 1995; Lin, Weng et al., 2003; Hsieh, Chiu et al., 2005; Chen and Chiu, 2009; Huang, Fang et al., 2014). Financial bonds enhance customer relationship by giving economic incentives, such as money savings (Berry 1995; Lin, Weng et al., 2003; Hsieh, Chiu et al., 2005). Special prices, discounts, gift with purchase and other financial incentives can keep regular customers and make them became loyal (Shammount, Polonsky et al., 2007). Quoting NFO Interactive research and consulting firm, Hsieh, Chiu et al. (2005) states that “53 percent of Internet users would buy more from e-commerce vendors that offered plans through which points were accumulated for merchandise or service redemption”. Additionally, non-monetary time savings are also considered as a financial bond. As an example, long-term clients can get a quicker service than other clients (Lin, Weng et al., 2003). Social bonds form through the interpersonal interaction between the customer and the company and they secure loyalty with friendship. To achieve a social bond with customers, firms should maintain close contact with them (for instance: e-mails personalized by name), express their friendship, show that they care about their needs (two-way communication) and know their tastes. Social bonds also develop between customer-to-customer interactions and friendship, when they are sponsored by the company (sponsored communities) (Lin, Weng et al., 2003; and Hsieh, Chiu et al., 2005). Social bonds improve mutual understanding and contribute to an open and close relationship (Hsieh, Chiu et al., 2005). Structural bonds exist when the company offers solutions to its client’s problems through a service-delivery system (Lin, Weng et al., 2003; Hsieh, Chiu et al., 2005). 11 From the clients view point, these solutions are valuable and unique (Berry 1995), they reduce time and risk and increase convenience. When an online retailer offers customers more information, it is seen as competent and trustworthy (Hsieh, Chiu et al., 2005). In addition, when a business offers innovative products designed to match customers’ needs, integrated customer database and two-way exchange information technology, these are considered an important advantage over competition (Lin, Weng et al., 2003). Emotional bonds or affective bonds are positive and favourable emotions (passion, declaration of love, positive evaluation) associated with a relationship, which prevent switching behaviour and strength customer-brand relationship (Vlachos, Theotokis et al., 2010; Moore, Ratneshwar et al., 2012). Firms can enhance these bonds through acts of kindness from employees’ actions perceived as not being part of their responsibility (Moore, Ratneshwar et al., 2012). When customers feel that there is no difference between providers, the emotional bond can constitute a switching barrier (Sven, Ewa et al., 2008). 2.3 Customer Loyalty Customer loyalty has been defined as the relationship strength between customer’s psychological commitment towards a brand, store or product and permanent purchase. A strong and a favourable psychological commitment or relative attitude towards a brand, product or store, as well as repeat patronage, positively influence long-term loyalty (Dick and Basu, 1994; Chaudhuri and Holbrook, 2001; and Huang, Fang et al., 2014). However, sometimes customers have a favourable attitude towards a brand/product/store but do not buy it frequently because he/she has a greater favourable attitude towards another one. Moreover, even when customers have a favourable attitude towards a brand, that positive relative attitude “may vary on a continuous from weak to strong depending on the individuals’ evaluative assessment” (Dick and Basu, 1994, p. 101). Therefore, it is important to understand the customer’s level of relative attitude as well as the customer’s level of repeat patronage. Dick and Basu (1994) presented four conditions (Figure 1). 12 Figure 1 – Relative Attitude-Behaviour Relationship (adapted from Dick and Basu, 1994) ______________________________________________________________________ Repeat Patronage High Low Relative Attitude High Loyalty Latent Loyalty Low Spurious Loyalty No Loyalty ______________________________________________________________________ The worst scenario happens when customers’ relative attitude and repeat patronage are low (Figure 1). In this case we have an absence of loyalty. This situation can occur to new products, brands or stores which need an implementation of a marketing communication plan to increase awareness. It can also occur when brands are seen as almost equal and, therefore, social norms (favourable location, for example) or situational exigencies (aggressive trade promotions, for example) need to be manipulated, aiming to create spurious loyalty. Spurious loyalty occurs when buying behaviour it is not influenced by attitudes (low relative attitude with high repeat patronage – Figure 1). If there is little differentiation between brands, especially in low involvement categories, consumers buying decision will rely on situational cues (familiarity or deals) and can be increased by social bonding (interpersonal relationship). As opposed to spurious loyalty, latent loyalty is characterized by a high relative attitude with low repeat patronage (Figure 1). In this case, a customer may have a favourable attitude towards a brand, but due to subjective norms or situational effects, it not leads to repeat patronage. For example, if a customer has a positive and favourable relative attitude towards a restaurant that only serves meat and that customer has to choose a restaurant for a group of friends composed by vegetarian people, he/she will have to choose another restaurant. The last condition presented by Dick and Basu (1994) is loyalty. Loyalty is the target of relationship marketing and the outcome of a successful relational bond strategy. When consumers have a high relative attitude and a high repeat patronage 13 (Figure 1), although they are able to perceive differences between competing brands, they do not defect. Competition is likely to try: to decrease perceived differentiation with the leading brand and to increase perceived differentiation in its favour, instead; to induce spurious loyalty through the manipulation of situational factors; and/or apply instore promotions and displays to divert attention from attitudes to characteristics of the purchase context, for instance in the consumer nondurables market. Loyalty is then conceptualized as a high and positive relative attitude (attitudinal loyalty) combined with a high repeat patronage (behaviour loyalty). Behavioural loyalty has been measured according to purchase frequency, proportion of purchases, purchase sequence and probability of purchase, over a certain period of time (Shammount, Polonsky et al., 2007). It is a much more rational type of loyalty. Attitudinal loyalty relates to customer’s preferences regarding a brand: continuing to purchase, worth-of-mouth and recommendation, avoid switching behaviour (Shammount, Polonsky et al., 2007), increase volume of purchases, accept to pay a premium price (Zeithaml, Berry et al., 1996). Attitudinally-loyal customers are less susceptible to negative information about a brand/product/store than other customers (Donio, 2006), because they are emotionally attached. Customer loyalty was firstly measured using only behavioural loyalty because it is observable and easier to measure; the data is less costly to collect and helpful as benchmark (Quester and Lim, 2003). Nevertheless, behavioural loyalty cannot explain how and why customer loyalty is developed and modified (Dick and Basu, 1994). For instance, a consumer may repeatedly buy a brand or product because it is convenient or because it is a habit and not necessarily because he/she prefers it. Thus, sooner or later that consumer might be attracted by a price cut or discount in a competitive product (Quester and Lim, 2003). Consequently, customer loyalty should also be measured considering the psychological attachment that a customer has to a brand/product. Many authors used these two approaches to measure customer loyalty (Dick and Basu, 1994; Too, Souchon et al., 2001; Quester and Lim, 2003; and Huang, Fang et al., 2014). 14 2.3.1 Antecedents of Attitudinal and Behavioural Loyalty It is now know that in order to achieve loyalty; a strong and a favourable psychological commitment (relative attitude) towards a brand, product or store, as well as repeat patronage have to coexist (Figure 1). As a reason, it is important to understand the causal antecedents of both Attitudinal and Behavioural Loyalty. The antecedents to be presented follow Dick and Basu (1994) work and are summarized in Figure 2. Relative attitude or attitudinal loyalty is influenced by Cognitive, Affective and Conative antecedents, while repeat patronage or behavioural loyalty is influenced by Relative Attitude, Social Norms and Situational Influences (Figure 2). Cognitive antecedents are constituted by: the easy that an attitude can be retrieved from memory (accessibility), as an automatically activated attitude is more likely to guide behaviour; the level of certainty associated with an attitude or evaluation (confidence); the degree to which an attitude toward a brand is related to the value system of an individual (centrality), because central attitudes are more resistant to competing influence, are constant over time and they are highly associated with behaviour; and the level of clarity when consumers find alternative attitudes towards the target brand, product and store, since clarity can create conditions for preservation of an attitude-repeat patronage bond. Affective antecedents in turn comprise: emotions, as they are associated with intense states of arousal, lead to focused attention on specific targets and are capable of disrupting ongoing behaviour; feeling states/moods, even though they are not as intense as emotions, as disruptive as ongoing behaviour and so permanent, they can influence loyalty through their impact on accessibility. Individuals in good moods tend to indulge in self-gratification more than those in bad moods (Mischel, Coates and Raskoff, 1968 cit. in Dick and Basu, 1994). Moreover, affective antecedents also comprise: primary affect that represent responses that are independent of cognitions, and may be stimulated by rendering a familiar and preferred sensory experience available in the immediate purchase situation (using fragrant aromas in stores, for example); and the matching of consumer’s expectations and brand/product perceived performance satisfaction. Finally, conative antecedents ( switching costs , which are the supplier's product to another" (Porter, 1980, p. 10 costs, because t hey can influence consumers’ pur repeat patronage; and future product availability may act to either postpone a repurchase of the current product increase repurchase. Figure 2 – Customer Loyalty Framework __________________________________ ______________________________________________________________________ As referred above norms and situational factors an attitude; therefore, they are attitude was already explained below. Social norms , when unrelated behaviour. For example, a consumer may have a high relative attitude toward a fashion boutique but may feel rel Coginitve Antecedentes - Acessibility - Confidence - Centrality - Clarity Affective Antecedents - Emotions - Feeling States - Primary Affect - Satisfactio Conative Antecedents - Switching Costs - Sunk Costs - Expectation antecedents ( connotations or behavioural disposition) involves , which are the "one time costs facing the buyer of switching from one supplier's product to another" (Porter, 1980, p. 10 cit. in Dick and Basu, 1994) hey can influence consumers’ pur chases, increasing the likelihood of future expectations, given that consumers' expectations about product availability may act to either postpone a repurchase of the current product Customer Loyalty Framework (adapted from Dick and Basu, 1994) __________________________________ ____________________________________ ______________________________________________________________________ referred above repeated patronage is influenced by relative attitude, social norms and situational factors (Figure 2). These might either compl ement or contradict attitude; therefore, they are moderators of loyalty (Dick and Basu, 1994) explained , as a reason, the remaining antecedents are presented , when they are divergent from an attitude, they may lead to For example, a consumer may have a high relative attitude toward a fashion boutique but may feel rel uctant to patronize it due to the high price level of the Social Norms Situational Influences Relative Attitude Repeat Patronage Relational Bonds Formation 15 behavioural disposition) involves : "one time costs facing the buyer of switching from one Dick and Basu, 1994) ; sunk increasing the likelihood of given that consumers' expectations about product availability may act to either postpone a repurchase of the current product or ____________________________________ ______________________________________________________________________ relative attitude, social ement or contradict (Dick and Basu, 1994) . Relative , as a reason, the remaining antecedents are presented are divergent from an attitude, they may lead to For example, a consumer may have a high relative attitude toward uctant to patronize it due to the high price level of the Long-term Loyalty 16 store. Situational factors, can influence loyalty through actual or perceived opportunity for engaging in attitude-consistent behaviour (i.e., sales of preferred brands), incentives for switching to competing brands (i.e., deals), and in-store promotions that may take the consumer to buy a not so desired brand. In sum, loyal customers are cheaper to maintain and they are more likely to buy additional services/products from the company, to express positive opinions (word of mouth), to make recommendations to others, to resist to persuasion attempts and to have a reduced search motivation (Dick and Basu, 1994). They are even willing to pay more for a brand/product if they find a distinct value that no other has (Chaudhuri and Holbrook, 2001). Therefore, the study of social norms and situational factors, as well as relative attitude, as a way to offer an indication for the strength of loyalty, is crucial. The stronger the relative attitude towards a brand, the more likely the individual is to overcome countervailing social norms and/or situational contingencies. Besides, loyalty ranges on a continuous from “spurious” to “true”, and the relational bonds formed during the customer-firm relationship lead to loyal customers (Figure 2). 2.3.2 Online Loyalty vs. Offline Loyalty In the previous sections loyalty was presented following literature applied to the offline environments. However, traditional concepts of loyalty may not be appropriate on online environment. Internet has given customers the ability to search and compare, faster and easier than in offline markets. For instance, online customers can use price comparison websites (Chaston and Mangles, 2003), such as www.kuantokusta.pt or www.trivago.pt, to compare product/services prices between web stores. As a result, internet has increased customers’ power. Moreover, gaining customers on the internet is more expensive than on traditional markets and it is only in later years, when costs of serving loyal customers fall and the volume of their purchases rises, that online buyers start to be profitable (Reichheld and Schefter, 2000). On the other hand, online customers purchase more than offline 17 customers and give more referrals. If word of mouth is a powerful outcome of customer loyalty, word of mouse has a higher impact as it is much faster (Reichheld and Schefter, 2000). The same online customer can send an e-mail to dozens of friends or share its experience on Social Networks. Like that, the customers who referred become trustful advertisers of the company, for free. For example, eBay says that when referred customers need help, they tend to first contact the customers who referred the company, instead of calling the eBay’s Help Desk (Reichheld and Schefter, 2000). It can then be concluded that the value of online loyalty is often greater than offline loyalty. For that reason, building customer loyalty is crucial for business survival (Reichheld and Schefter, 2000). But do the old rules apply to online loyalty? According to Reichheld and Schefter (2000) and Gommans, Krishman et al. (2001), they do, but with a new context. As explained above, attitudinal loyalty relates to customer’s preferences towards a brand/store and it includes cognitive, affective and behavioural intent dimensions (Gommans, Krishman et al., 2001). As Gommans, Krishman et al. (2001) explained, offline loyalty is supported on image brand building through advertising, while online loyalty emphasizes offering customized information (cognitive dimension) as customers’ preferences and purchases are electronically documented. For example: if a customer exits a website when price appears, he/she is most probably price-sensitive; if he/she searches all over the website without making a purchase, he/she could be able to find what he/she is looking for (Reichheld and Schefter, 2000). Behavioural loyalty in turn, is defined as repeated purchasing behaviour. Therefore, in offline business a customer can be loyal to a brand or store that he/she repeatedly buys, whether it is because the customer is loyal or because he/she has time restrictions and information deficits (Gommans, Krishman et al., 2001). In e-commerce customers do not have time restrictions because web stores work 24/7, or difficulty in finding relevant information in adequate time, as that is at a distance of a click. Consequently, online behavioural loyalty is more complex and harder to achieve than offline behavioural loyalty (Gommans, Krishman et al., 2001). 24 3.2.2 Data Collection To perform this study a convenient sample (Maroco, 2003) of 220 University of Porto students and Facebook contacts was used. Due to limited time and resources, this was the fastest and most convenient way to carry out the questionnaire, as only online clients were needed and, therefore, it was going to be difficult to find a good number of people who had ever made online shopping any other way. The data was collected according to a web survey methodology, through a structured questionnaire, using Google Docs platform. As referred in section 3.2.1 the methodology is descriptive quantitative. This type of methodology allows setting the level of association between each relational bond and customer loyalty and, for that reason it allowed to define what influences customer loyalty on the online business environment (Malhotra, 2002). As the questionnaire (see attachment 1) is concerned, each question was constructed on the existing relationship bonds and loyalty literature. The first question was a filter question to distinguish between respondents who had made online shopping twice or more on the same website, and between those who had shopped once on the same website (or never), because, according to Liljander and Strandvik (1995), for a customer-firm relationship to be considered, a second purchase has to be made. Once respondents had gone through the first question, a 7-point Likert scale (ranging from 1 - Totally Disagree to 7 - Totally Agree) question was presented to measure each relational bond, including 5 items to measure the financial bond, 6 for the social bond and structural bond and 4 for the emotional bond, according to the work of Liang, Chen et al. (2008); Hsieh, Chiu et al. (2005); and Shammount, Polonsky et al. (2007). Measurement items can be found in attachment 2. To measure loyalty, a 7-point Likert scale was also used, with 3 items to measure behaviour loyalty and 9 items to measure attitudinal loyalty (see attachment 2). This is in accordance to Moore, Ratneshwar et al. (2012) work. Afterwards, 4 demographic questions were made: gender, age, education and family income. The data was collected between June 22 nd and July 7 th . 25 Chapter 4 - Data Analysis More than 50.000 Euros Between 20.000 and 49.000 Euros Between 10.000 and 19.999 Euros Between 6.000 and 9999 Euros Less than 5.999 Euros More than 55 years Between 46 and 55 years Between 36 and 45 years Between 26 and 35 years Between 18 and 25 years Annual Family Income Education Age Gender In this chapter it is characterize the sample of the study compared to market research data, and afterwards, the data collected from the online questionnaires is presented and 4.1 Description of the Sample For a customerfirm relationship to exist, customers have to purchase at least twice from the same vendor ( Liljander and Strandvik questionnaires answered, only 169 those were related to people who had than once. The sampl e is majority composed by and their ages vary from 18 to more than 55 years old this sample is between 18 and 35 years old. This might be due the fact that the questionnaire was sent to contacts. However, according to the Marktest’s Bareme Internet 2012 make more online shopping are students and young people between 25 and 34 years old (Marktest, 2012). Figure 4 – Descriptive Statistics for Sample Characteristics 10,1 8,9 34,5 21,4 10,7 14,3 5,3 30,2 13,0 1,2 1,8 5,3 16 31,4 NA More than 50.000 Euros Between 20.000 and 49.000 Euros Between 10.000 and 19.999 Euros Between 6.000 and 9999 Euros Less than 5.999 Euros PhD and others Master Bachelor 12º grade 9º grade More than 55 years Between 46 and 55 years Between 36 and 45 years Between 26 and 35 years Between 18 and 25 years Female Male Valid Percent it is characterize the sample of the study to market research data, and afterwards, the data collected from the online questionnaires is presented and analysed. Description of the Sample firm relationship to exist, customers have to purchase at least twice Liljander and Strandvik , 1995). As a result, f questionnaires answered, only 169 were considered valid (about 77%) those were related to people who had made online shopping , on the same store, e is majority composed by female respondents (55%) than male and their ages vary from 18 to more than 55 years old (Figure 4). However, this sample is between 18 and 35 years old. This might be due the fact that the questionnaire was sent to the FEP student community as well as to my Facebook contacts. However, according to the Marktest’s Bareme Internet 2012 more online shopping are students and young people between 25 and 34 years old Descriptive Statistics for Sample Characteristics 26 34,5 50,3 45,6 55,0 45,0 and then they are to market research data, and afterwards, the data collected from the online firm relationship to exist, customers have to purchase at least twice As a result, f rom the 220 online (about 77%) , because only , on the same store, more female respondents (55%) than male (45%) However, 76,9% of this sample is between 18 and 35 years old. This might be due the fact that the the FEP student community as well as to my Facebook contacts. However, according to the Marktest’s Bareme Internet 2012 , the groups that more online shopping are students and young people between 25 and 34 years old 27 With regard to their education level (Figure 4), respondents with higher education levels are the ones who make more online shopping (50% have a bachelor degree and 30% have a master degree). According to the Marktest’s Bareme Internet 2012, 74.2% of middle management people make online shopping (Marktest, 2012). As also found in the Marktest’s Bareme Internet 2012, people with a higher income, make more online shopping. 72.6% of high class individuals shop online shopping. However, in Figure 4, “more than 50.000 Euros” range, only represents 8,9% of online shoppers. Once again, this might be due the fact that the questionnaire was administered to a student community who, in its majority, live under parents’ support. 4.2 Data Analysis The data collected from the 169 online questionnaires was analyzed with SPSS statistics program. 4.2.1 Exploratory Factor Analysis The analysis starts with an Exploratory Factorial Analysis by the method of Principal Axis Analysis using Varimax rotation for financial bonds, social bonds, structural bonds, emotional bonds, attitudinal loyalty and behavioural loyalty variables, following Hsieh, Chiu et al. (2005) work. The Exploratory Factorial Analysis for Relational Bonds variables resulted in a Kaiser-Meyer-Olkin (KMO) equal to 0,860, considered as good (Maroco, 2003) and in a Bartlett’s test Sphericity with a p-value <0,001, which means that the null hypothesis is rejected and, as a reason, there is a significant correlation between the variables, as well as, the data is appropriate for a Factor analysis (Maroco, 2003). With the Factor Analysis it was identified four factors composed by nineteen variables, through scree plot and rotated component matrix observation, with a total variance explained of 55,74% (Table 2). The Exploratory Factorial Analysis for Loyalty variables resulted in a KMO equal to 0,858, considered also as good and in a Bartlett’s test Sphericity with a p-value <0,001, which means, once again, that the null hypothesis is rejected and, as a reason, 28 there is a significant correlation between the variables, as well as, the data is appropriate for a Factor analysis. With the Factor Analysis it was identified one factor composed by ten variables, through scree plot and rotated component matrix observation, with a total variance explained of 43,25% (Table 2). Table 2 – Rotated Factor Matrix Factor 1 2 3 4 Relational Bonds I love shopping from this online store ,770 I feel good about this online store ,740 Shopping at this online store puts me in a good mood ,675 I Like visiting this online store ,612 Provides various ways of payments ,548 ,405 I can receive a prompt response after a complaint ,436 ,313 Provides cumulative point programs ,660 Offers rebates if I buy more than a certain amount ,631 ,338 Offers presents to encourage future purchasing ,553 ,470 Provides discount for regular customers ,489 ,387 Offers integrated service with its partners ,403 Provides prompt service for regular customers ,314 Keeps in touch with me ,625 Offers new information about its products/services ,604 I can receive greeting cards or gifts on special days ,349 ,535 Provides personalized service according to my needs ,439 ,348 Offers opportunities for members to exchange opinions ,575 Collects my opinion about services ,521 Promises to provide after-sales service ,469 Loyalty For me, this online store is the best alternative ,791 I expect to be a client of this online store for a long period of time ,770 I really care about the fate of this online store ,751 I am proud to tell others that I buy from this online store ,746 I would recommend this online store to others ,708 I am willing to put an extra effort to buy from this online store ,685 I buy from this online store on a regular basis ,629 I have used this online store for a number of years ,559 This online store stimulates me to buy repeatedly ,543 As a consumer to this online store, I feel that I am prepared to pay more for higher quality products / services ,526 Extraction Method: Principal Axis Analysis Rotation Method: Varimax with Kaiser Normalization 29 All factors were then labelled according to literature. In relational bonds, factor 1, 2, 3 and 4 were labelled Emotional Bond, Financial Bond, Structural Bond and Social Bond, respectively. After that, the degree of reliability and scales validity was made through Cronbach’s Alpha analysis. The coefficient alphas for financial, social, structural, emotional bonds and loyalty were, respectively, 0,679, 0,616, 0,677, 0,857 and 0,890. However, in the financial bond factor, adding the “Offers presents to encourage future purchasing” variable would increase Cronbach’s Alpha. Therefore, this variable was added to Financial Bond Factor with a Cronbach’s Alpha of 0,729. On the other hand, on the Emotional Bond factor, eliminating “Provides various ways of payments” variable increases Cronbach’s Alpha to 0,872. 4.2.2 Descriptive Statistics Following the factorial analysis, it is now presented in Table 3, the descriptive statistics for the four factors extracted from relational bonds and for the factor extracted from loyalty. The analysis of Table 3 shows that the mean of all items of all factors, ranges from 3 to 5, which considering that a 7-point Likert scale was used for both Relational Bonds and Loyalty, it suggests that respondents mainly used the middle levels of the scale (3 – Partially Disagree, 4 - Nor Agree or Disagree, 5 – Partially Agree). These low levels of agreement or disagreement may indicate that online customers are not totally committed to the online stores and the level 4 (nor agree or disagree) can also indicated that online stores are not pursuing the establishment of relational bonds with their customers and/or trying to achieve their loyalty (“Collects my opinion about services”, average of 4,14; “Offers presents to encourage future purchasing”, average of 4,11). In fact, the lack of commitment from online customers can be a consequence of the lack of relationship investment from online vendors. Considering each factor individually, on Emotional Bond, the items that had the highest levels of agreement, on average, were the items not associated with purchase: “I feel good about this online store” and “I Like visiting this online store” (Table 3). This 30 suggests a Latent Loyalty, as the attitude towards the store is positive but it is not related to purchase behaviour. On Structural Bonds the highest mean was on the item about sharing information and lowest was on the item about receiving greeting cards and gifts on special days. Thus, online stores are giving updates about their products or services but they are not focusing on the client, especially on the client’s birthdays or other special occasions. Table 3 – Descriptive Statistics for Relational Bonds and Loyalty Mean Std. Deviation Emotional Bond Shopping at this online store puts me in a good mood 4,58 1,442 I feel good about this online store 5,25 1,210 I love shopping from this online store 4,67 1,429 I Like visiting this online store 5,11 1,369 Structural Bond Keeps in touch with me 4,86 1,708 I can receive greeting cards or gifts on special days 3,54 1,964 Offers new information about its products/services 5,16 1,481 Social Bond Offers opportunities for members to exchange opinions 3,86 2,149 Collects my opinion about services 4,14 2,000 Financial Bond Provides discount for regular customers 4,15 2,006 Provides cumulative point programs 3,29 2,175 Offers rebates if I buy more than a certain amount 3,82 1,971 Offers presents to encourage future purchasing 4,11 1,925 Loyalty I am willing to put an extra effort to buy from this online store 3,01 1,665 I expect to stay with this online store for a long period of time 4,54 1,543 As a consumer to this online store, I feel that I am prepared to pay more for higher quality products / services 3,07 1,604 For me, this online store is the best alternative 4,58 1,568 I am proud to tell others that I buy from this online store 3,59 1,609 I really care about the fate of this online store 3,79 1,669 I would recommend this online store to others 5,22 1,279 I buy from this online store on a regular basis 4,54 1,508 I have used this online store for a number of years 4,46 1,655 This online store stimulates me to buy repeatedly 4,31 1,586 31 On Social and Financial bonds, all items had low levels of agreement (Table 3), which can indicated a low level of interaction between online stores and online customers (in the case of social bonds) and the absence of economic incentives for regular customers (in the case of financial bonds). In the case of Loyalty, the highest level of agreement was registered on item: “I would recommend this online store to others” (Table 3). This suggest online customer – online store relationship is leading to positive word-of-mouth and recommendation. Items that suggest repurchase behaviour also had higher levels of agreement: “I buy from this online store on a regular basis” and “For me, this online store is the best alternative”. This section fulfils the first research objective: “identify the relational bonds and loyalty of online customers”. 4.2.3 Multiple Linear Regression The hypotheses stated in the last chapter were created to determine if loyalty can be influenced by the variables of Relational Bonds, particularly Financial Bonds, Social Bonds, Structural Bonds and Emotional Bonds. Thus, a Multiple Linear Regression Analysis was performed between financial bonds, social bonds, structural bonds, and Emotional bonds (independent variables) and loyalty (dependent variable) (Table 4). The coefficient of determination R² = 0,397, means that 39,7% of the variability of Loyalty is explained by the variables of relational bonds. The analysis of the simple correlation coefficient (R = 0,630) suggests that there is a high positive correlation (R > 0,6) between the variables. Anova shows that the correlation is significant, as p-value = 0,000, the null hypothesis is rejected. The Collinearity Statistics shows that there is no multicollinearity effect in this model (Hsieh, Chiu et al., 2005). 32 Table 4 - Regression Analysis between Relational Bonds variables and Loyalty R R Square Adjusted R Square Durbin-Watson ,630 a ,397 ,382 1,811 Anova Sum of Squares df Mean Square F Sig. Regression 60,376 4 15,094 26,939 ,000 b Residual 91,890 164 ,560 Total 152,266 168 Coefficients B Std. Error Beta T Sig. Collinearity Statistics Tolerance VIF (Constant) 1,580E-16 ,058 ,000 1,000 Financial Bond ,206 ,078 ,186 2,638 ,009 ,742 1,349 Emotional Bond ,586 ,078 ,577 7,526 ,000 ,627 1,596 Structural Bond -,126 ,087 -,114 -1,449 ,149 ,599 1,670 Social Bond ,078 ,083 ,065 ,944 ,347 ,784 1,275 a. Predictors: (Constant), Social Bond, Financial Bond, Emotional Bond, Structural Bond b. Dependent Variable: Loyalty Analysing the coefficients first column, the variables that present the highest relative contributions to explain Loyalty are firstly Emotional Bonds, then Financial Bonds and lastly Structural Bonds. The only variables that affect Loyalty significantly (p-value < 0,05) are Financial Bonds and Emotional Bonds (Maroco, 2003). Social and Structural Bonds are not relevant (p-value > 0,05). Consequently, H2 and H3 are not supported (Table 5). 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Parasuraman (1996), "The Behavioural Consequences of Service Quality", Journal of Marketing, Vol. 60, N.º 2, pp. 31-46. 44 Attachments 45 Attachment 1 – Questionnaire I am studying the relational bonds between consumers and electronic companies for a master dissertation in Marketing, of the School of Economics and Management of University of Porto. The data collected is confidential. I thanks for your collaboration! 1. Have you ever made online shopping more than once on the same online store?* Yes No If your answer to the previous question was negative, your questionnaire ends here. I appreciate your collaboration. 2. Considering an online store where you have shopped more than once, tell your level of agreement between 1 and 7* (being 1 “Totally Disagree", 2 “Disagree”, 3 “Partially Disagree”, 4 “Nor Disagree or Agree”, 5 “Partially Agree”, 6 “Agree” and 7 “Totally Agree”): 1 2 3 4 5 6 7 Provides discount for regular customers Keeps in touch with me Provides personalized service according to my needs Offers new information about its products/services Offers presents to encourage future purchasing Employee helps me solve my personal problems Offers integrated service with its partners I Like visiting this online store Provides cumulative point programs Collects my opinion about services Promises to provide after-sales service I feel good about this online store Offers rebates if I buy more than a certain amount Offers opportunities for members to exchange opinions I can receive a prompt response after a complaint I love shopping from this online store Provides prompt service for regular customers I can receive greeting cards or gifts on special days Provides various ways to deal with transactions Shopping at this online store puts me in a good mood 46 3. Considering an online store where you have shopped more than once, tell your level of agreement between 1 and 7* (being 1 “Totally Disagree", 2 “Disagree”, 3 “Partially Disagree”, 4 “Nor Disagree or Agree”, 5 “Partially Agree”, 6 “Agree” and 7 “Totally Agree”): 1 2 3 4 5 6 7 I buy from this online store on a regular basis This online store stimulates me to buy repeatedly I have used this online store for a number of years I really care about the fate of this online store I am willing to put an extra effort to buy from this online store As long as the product is similar I could just as well be buying from a different online store I am proud to tell others that I buy from this online store For me, this online store is the best alternative I expect to stay with this online store for a long period of time I feel very little loyalty to this online store As a consumer to this online store, I feel that I am prepared to pay more for higher quality products / services I would recommend this online store to others 4. Gender: Female Male 5. Age: Between 18 and 25 years old Between 26 and 35 years old Between 36 and 45 years old Between 46 and 55 years old More than 55 years old 6. Education: 9º grade 12º grade Bachelor Master PhD and others 47 7. Annual Family Income? Less than 5.999 Euros Between 6.000 and 9999 Euros Between 10.000 and 19.999 Euros Between 20.000 and 49.000 Euros More than 50.000 Euros Do not answer *Obligatory answer I appreciate your collaboration! 48 Attachment 2 – Questionnaire Measurement Items Constructs Measurement items Sources Financial Bonds Provides discount for regular customers Lin, Weng and Hsieh's (2003); Hsieh, Chiu and Chiang (2005); Shammount, Polonsky and Edwardson (2007) Offers presents to encourage future purchasing Provides cumulative point programs Offers rebates if I buy more than a certain amount Provides prompt service for regular customers Social Bonds Keeps in touch with me Lin, Weng and Hsieh's (2003); Hsieh, Chiu and Chiang (2005); Shammount, Polonsky and Edwardson (2007) Concerned with my needs Employee helps me solve my personal problems Collects my opinion about services I can receive greeting cards or gifts on special days Offers opportunities for members to exchange opinions Structural Bonds Provides personalized service according to my needs Lin, Weng and Hsieh's (2003); Hsieh, Chiu and Chiang (2005); Shammount, Polonsky and Edwardson (2007) Offers integrated service with its partners Offers new information about its products/services Promises to provide after-sales service I can receive a prompt response after a complaint Provides various ways to deal with transactions Emotional Bonds I Like visiting this online store Moore, Ratneshwar and Moore (2012) I feel good about this online store I love shopping from this online store Shopping at this online store puts me in a good mood Behavioural loyalty I buy from this online store on a regular basis Too, Souchon and Thirkell (2001); Shammount, Polonsky and Edwardson (2007) This online store stimulates me to buy repeatedly I have used this online store for a number of years Attitudinal loyalty I really care about the fate of this online store I am willing to put an extra effort to buy from this online store As long as the product is similar I could just as well be buying from a different online store I am proud to tell others that I buy from this online store For me, this online store is the best alternative I expect to stay with this online store for a long period of time I feel very little loyalty to this online store As a consumer to this online store, I feel that I am prepared to pay more for higher quality products / services I would recommend this online store to others